Court Voids $358 Million in Damages Against Microsoft

A U.S. federal appeals court on Friday vacated $358 million in damages that had been awarded by a jury to Alcatel-Lucent after Microsoft was found to have infringed patented software technology.

The U.S. Court of Appeals for the Federal Circuit in Southern California denied Microsoft's appeal of the infringement charge, but ordered a new trial to reassess the damages portion of the judgment. A copy of the 64-page appeals court order can be accessed here (PDF).

The case involved a so-called "Day patent" (U.S. Patent No. 4,763,356) that Microsoft was found to have violated in three applications: Money, Outlook and Windows Mobile. In assessing the damages, the appeals court examined only how Microsoft Outlook may have infringed. Outlook uses a popup calendar, or date-picker feature, that was found to have violated Lucent Technologies' patent. Lucent and Alcatel merged in late 2006.

The appeals court apparently could not determine how the jury calculated the damages, which were awarded as a lump sum. The court was expecting some sort of royalty figure to be specified when the jury calculated the lump-sum award. Also, it wasn't sure if the jury had based the damages on total Outlook sales -- the court agreed with Microsoft that such a calculation wouldn't be fair.

"In the present case, the jury had almost no testimony with which to recalculate in a meaningful way the value of any of the running royalty agreements to arrive at the lump-sum damages award. [p. 43]," the court stated.

The court had agreed with Microsoft's contention in its appeal that Alcatel-Lucent hadn't provided evidence of direct patent infringement. For instance, Alcatel-Lucent could only cite one person -- its expert witness -- who had gone through the steps of the invention. However, it ultimately rejected Microsoft's noninfringement claim due to "circumstantial evidence" that other Outlook users would have used the application in a way that violated Alcatel-Lucent's patent.

Dell Inc. was also a defendant in the case but the jury found "no infringement by Dell" on the patent claims. The original complaint was lodged by Lucent in 2002 against computer maker Gateway, "and Microsoft subsequently intervened," according to the court record.

Microsoft spokesman Kevin Kutz told Reuters that Microsoft was "pleased" that the damages were vacated. It's unclear when the next trial, reassessing the damages, will begin. About $8 billion worth of the three products using the technology was sold.